According to Statistics Norway, mainland GDP rose by 0.6 percent q-o-q in the first quarter of the year, following 0.7 percent in Q4 2017. The outcome was exactly as we had anticipated and slightly above the consensus estimate at 0.5 percent. Power supply – a notoriously volatile figure – added 0.1 p.p. to growth in Q1. But also note that Q4 was revised up from initially 0.6 percent to 0.7 percent. All told, mainland GDP growth did not slow notably in Q1; momentum is basically holding up, with the economy hovering around a quarterly pace of 0.6-0.7 percent. Relative to Norges Bank, the outcome for Q1 was somewhat weaker than expected, as Norges Bank had anticipated a solid 0.72 percent growth rate. But given the said revisions, overall developments were broadly in line with Norges Bank’s assessments. We note that registered unemployment, an important cross-check, has been on the weak side of expectations. But this could prove temporary, as the National Accounts show solid employment growth. In summary, the data for the real economy supports the case for a rate hike in September.

The outlook for the real economy supports a rate hike in September

Digging a bit into the details, goods consumption was weak as expected. And residential investments fell somewhat further in Q1. No surprises here, as that had already been indicated by the monthly data. On the other hand, the overall service sector rose solidly, as it has done over the past three quarters. Net exports also added to growth, with a solid rise in exports of traditional goods. With regard to petroleum investments, Q1 saw a severe drop. But this was following a sharp upward revision to Q4 last year. The quarterly figures are volatile, but the overall outlook for petroleum investments remains favourable; we expect a solid investment increase throughout 2018 and 2019. Overall, the Norwegian economy looks to be maintaining its momentum, with an above-trend pace. And the outlook for the real economy supports a rate hike in September.